Markforged Holding Corporation (NYSE:MKFG) shares have had a horrible month, losing 29% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 30% share price drop.

Even after such a large drop in price, it's still not a stretch to say that Markforged Holding's price-to-sales (or "P/S") ratio of 1.1x right now seems quite "middle-of-the-road" compared to the Machinery industry in the United States, where the median P/S ratio is around 1.5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

What Does Markforged Holding's Recent Performance Look Like?

Markforged Holding hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, Markforged Holding would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 7.1% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 31% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 5.2% during the coming year according to the four analysts following the company. That's shaping up to be materially higher than the 1.3% growth forecast for the broader industry.

In light of this, it's curious that Markforged Holding's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Markforged Holding's P/S Mean For Investors?

Following Markforged Holding's share price tumble, its P/S is just clinging on to the industry median P/S. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Despite enticing revenue growth figures that outpace the industry, Markforged Holding's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Markforged Holding, and understanding these should be part of your investment process.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.